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As business environment changes, the usefulness of financial statement shifts from mere gathering of operating results to important channel for investors to collect information of the company. Financial statement is a comprehensive reflection of a company's financial situation, operating performance and future trends. It helps correctly evaluating the business and utilizing potentials to improve performance.

Financial statement analysis is a basic means for accounting information users such as investors, auditors, government, to analyze and evaluate the financial situation and performance of a company. Through a systematic analysis of past performance, one can measure current financial soundness and foresee the trend of development of a company. The basic function of financial statement analysis is gathering, categorizing, comparing and analyzing financial data and transferring it into information that is useful for decision making, so that the uncertainty is reduced to the minimum level.

This case study is based on an analysis of financial statement of PayPoint plc from 2005 to 2009. Using ratio analysis and comparison with Post Office, PayPoint's major competitor, I aim to find out the performance of PayPoint throughout these years.

Keywords: Financial Statement Analysis Ratio Analysis Horizontal Analysis


Life is getting more convenient in the 21st century. Today, we can pay almost all kinds of bills just by pushing a few buttons. The credit should go to modern payment systems. PayPoint is one of the UK's leading branded payment collection network used, primarily, for the cash payment of bills and services and prepayments for mobile telephones and energy meters. As an industry that is both close to daily life of all citizens and directly connected with operating of money, a sound financial system plays a critical role in the prospect of such companies. Financial statement analysis provides a good measure. Internally, financial statement analysis is used by accountants, financial controllers and treasurers to evaluate and diagnose the day-to-day running of the business and to spot any inefficiency or errors that have negative effect on profitability. Externally, information users such as investors, auditors, government utilize financial statement analysis to gain a better understanding of the business, so that decisions are fairly made. Financial statement analysis is a powerful tool for both management and investors. This report aims to have a better understanding of the operations of PayPoint through various analyses, so that we can evaluate the performance of PayPoint and compare it with its major competitor. Finally, conclusions are made with suggestions regarding future operation.

Industry Background

Payments are an essential part of everyday life, which underpin all forms of economic activity, and affect everyone - as individuals and businesses. People make a variety of payments every day with the expectation that these payments are secure and reliable. Most consumers are unaware of what happens behind the scenes, but, by their very nature, payment systems require a high degree of co-operation by numerous different stakeholders for a payment system to function. The UK payment industryenvironment can be broadly categorised into five payment types:

The market for payment systems is fairly a growing one. The use of automated services has increased over recent years, with the total number of direct debit, direct credit and standing order payments increasing by 12.6% between 2000 and 2002. Between January 2000 and December 2002 monthly transactions for debit debits and direct credits have increased by 27% and 21.8% respectively. Final customers are now choosing to use direct debits for utility bill and insurance premium payments, with 455 million and 423 million payments per annum in 2001. The main growth in direct credits has been the movement towards automated wage transfers, accounting for approximately half of all payments. Within recent years growth has been attributed to remote banking, with 43 million payments in 2001. In UK, Post Office is currently the biggest service provider. As a subsidiary of Royal Mail Group, Post Office enjoys the synergy created by the group. On the other hand, PayPoint achieved big success not only in the UK, but also in Romania. While companies providing such service are expanding throughout the country, people are more inclined to accept this convenient life style, which means the potential for this industry is brilliant.

Company's Information

PayPoint is a leading branded payment collection network used, primarily, for the cash payment of bills and services and prepayments for mobile telephones and energy meters. PayPoint commenced trading in 1996 and initially collected payments through its network of Retail Agents for its founder Client investors, who included British Gas, BT, BBC TV Licensing, London Electricity (now part of EdF) and four water companies. Since then, PayPoint has successfully added to its founder Client base, grown its Retail Agency network, developed new services and now has many new Clients. In November 2006 and February 2007 PayPoint acquired internet payment service providers Metacharge and SECPay, respectively. These ventures were merged and rebranded as, providing a secure debit and credit card payment system for web-merchants, in July 2008. The company provides a wide range of services. It allows customers to make cash payments at any one of its 20,750 PayPoint outlets (in the UK) to settle their gas, electricity or water bills, or to pay for their TV licence, Council Tax or London congestion charge or to top-up pay-as-you-go mobile phones. It allows customers to make cash payments to re-charge their gas or electricity keys and then use those keys in place of coin-based electricity meters. It operates in-store ATMs connected to the LINK network, and it operates in-store credit or debit card processing facilities with Chip and Pin compliance.

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